New ‘rights’ for renters can backfire and harm them

Times are tough for home buyers, for small businesses paying off loans on flexible interest rates, for householders with limited incomes as living costs reach the highest level on record, for those seeking to enter the housing market, for many mum-and-dad buyers paying off an investment property and for renters. New housing affordability data reported on Thursday shows the value of national dwellings has risen by more than 25 per cent while national median rents have climbed by $137 a week since the start of the Covid-19 pandemic. Analysis of CoreLogic data by PowerHousing Australia reveals that the portion of homes selling for less than $500,000 has fallen dramatically, with only 2.3 per cent of houses in Sydney sold for less than $500,000. Higher interest rates are heightening the difficulties, including those of investors paying off rental properties who pass on the costs to tenants. They also pass on higher local government and state taxes and charges that are giving governments and councils a handy windfall. At the core of the problem is inflation which, as Reserve Bank governor Philip Lowe said on Tuesday, “makes life difficult for people and damages the functioning of the economy”.

Keen to be seen to be doing something, housing ministers met in Canberra on Wednesday to discuss options to strengthen renters’ rights after Anthony Albanese secured state and territory agreement at national cabinet for such action. They pledged to develop strong reforms in coming months to protect renters, flagging changes to the size and frequency of rent increases. They need to guard against unintended consequences, however. And the Albanese government needs to guard against proposals put forward by Greens leader Adam Bandt. On ABC radio on Wednesday, Mr Bandt surpassed himself in idiocy, calling on the government to violate the independence of the RBA board by overturning its decision to lift the cash rate by 25 basis points. Jim Chalmers sensibly rejected the call.

The Australian has wasted little editorial space in recent years dissecting the Greens’ economically illiterate policy prescriptions, which would result in great hardship for vast numbers of Australians if they were ever implemented. It is necessary to do so now, however, because Mr Bandt is trying to lever the Prime Minister and the Treasurer into agreeing to extreme, counter-productive measures to secure the Greens’ support in the Senate for Labor’s housing scheme. In opposition, Mr Albanese promised that a Labor government would not be pushed left by the Greens. He and Dr Chalmers must double down on that resolve and seek solutions from the sensible centre of economic policy, with an emphasis on encouraging growth, productivity and prosperity.

Mr Bandt made the absurd claim on Wednesday that Labor and the RBA were using “everyday people as cannon fodder in the war on inflation” through higher interest rates. His proposed solutions included reining in corporate profits, lifting corporate and bank taxes, and other command-economy moves such as freezing rents for two years and then capping them after that, freezing power bills, doubling rental assistance, and major spending on government-funded public housing.

His blueprint would increase the deficit, create unemployment as corporations laid off staff and deplete the market of rental housing stock, leaving more people struggling to find a home. Thousands of mum-and-dad landlords already are selling off their rental properties and worsening the housing supply crunch in response to increasing interest rates and state Labor governments’ moving to strengthen renter protections, Mackenzie Scott reported in The Weekend Australian on Saturday.

Queensland and the ACT have ventured down that path, with Queensland Premier Annastacia Palaszczuk recently passing reforms to limit landlords in increasing rents to once a year. Residential and small business tenants might be better off, however, if states and local authorities contained land taxes and property rates, which also have been rising sharply.

New analysis from PowerHousing Australia helps explain why. Most investment property owners, Australian Taxation Office data shows, earn around $80,000 in taxable income. They include about 160,000 teachers, nurses and clerical workers. About 13 per cent are young people, aged 19 to 29, looking to get ahead in life by getting on the property ladder. Older mum-and-dad investors are looking ahead to retirement, building their asset base in a way that will help them be self-funded rather than dependent on the welfare system and a shrinking pool of taxpayers.

PowerHousing chief executive Nick Proud warned that any changes to renters’ rights must balance the need for rental stability while understanding that landlords would be forced to sell the property if they were unable to repay their investment loan. As he said, most Australians providing properties are not property barons. Australian Taxation Office income data shows that more than 70 per cent of those who have a rental property have just one. If they’re smart, they will recognise the value of good tenants, treat them well and set rents are reasonable levels. Penalising landlords Bandt-style will not help tenants, taxpayers or the economy.